Below The Beltway

The Chinese have responded to Barack Obama’s tire tariff with some aggressive trade policies of their own:

Sept. 14 (Bloomberg) — China announced a probe into the alleged dumping of American auto and chicken products, two days after U.S. President Barack Obama imposed tariffs on imports of tires from the Asian nation.

Chinese industries have complained that they’re being hurt by “unfair trade practices,” the nation’s Ministry of Commerce said on its Web site yesterday. The Beijing-based ministry is also looking into subsidies for the products, it said. It didn’t specify the imports’ value.

Irwin Seltzer, meanwhile, thinks that Obama’s decision is a sign of bad things to come:

Obama’s decision on tires makes it clear that he has no intention of supporting efforts to revive the almost 8-year-old Doha trade-opening negotiations. Some 36 nations met in New Delhi earlier this month and professed interest in completing a deal by the end of next year. Not likely: the recession has made jobs, jobs, jobs politicians’ central concern, and few are prepared to take the flak that will surely arise if they open their markets, and expose even a few domestic companies or farmers to job-destroying competition. The talks collapsed in July of 2008 precisely for that reason. Obama has been sitting on proposals for bilateral free trade agreements with Colombia and Korea, among others, and sees no reason to antagonize the strong, protectionist wing of his party, already unhappy with his failure — so far – to throw his weight behind a bill that would end the secret ballot in union-recognition elections, and require compulsory arbitration when union-management negotiations break down.

He will, however, have a hurdle or two to cross as he races to scupper America’s post-World War II trade policy. The World Trade Organization has ruled that Brazil is entitled to $295 million now and $150 million annually because the U.S. government has failed to eliminate subsidies to its 25,000 cotton farmers. That pittance won’t disturb a president who deals in billions and trillions, but the WTO also ruled that Brazil’s generic drug industry can retaliate against U.S. pharmaceutical manufacturers of drugs by copying drugs still under patent protection. That would please the left wing of the president’s party, convinced that drug prices in America are set at extortionate levels, but would more than a little upset the drug companies that have so far backed the president’s health-care reforms. And reduce the flow of new drugs that have helped to keep health-care costs from rising even faster than they have.

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All of these battles are merely skirmishes in a much broader battle. Almost every country is seeking to export its way out of the recession. Germany is relying on its exporters to create jobs; China is depending on its export machine to keep its economy growing fast enough to create millions of jobs and avoid social unrest; Japan’s new government, no longer reflexively pro-American, also needs exports to end a decade of stagnation. But Obama, in charge of the world’s consumer-of-last-resort, has decided to eschew that role in the future. Indeed, he has had his Trade Representative, Ron Kirk, announce that America will no longer allow its trade partners to “run roughshod over us.” Some of the president’s reasons for pushing exports and tightening up on imports are purely political — he needs the trade unions and his party’s left. Others are more fundamental — he has to cut the U.S. trade deficit lest the value of the dollar continue its descent and add to the inflationary pressures created by his enormous deficits.

Meanwhile, he has sent a signal to the Sino-Franco-Russian et al. anti-dollar bloc that for all his talk about international cooperation to fight the recession, he is in the end willing to go it alone if domestic politics so dictate. That will increase their resolve to find some replacement for the dollar as the world’s reserve currency. Obama might indeed turn out to be the “transformative” president he intends to be, but not quite in the way he intends.

Meanwhile, in addition to erecting trade barriers of their own, the Chinese have also said that they may appeal the tire tariff to the World Trade Organization:

China “strongly opposes” President Obama’s decision to impose tariffs on tire imports from the country and may refer the case to the World Trade Organization, its Ministry of Commerce said.

The United States had violated rules of the WTO and the tariff is a breach of the commitments made by the nation at Group of 20 summits, the ministry said in a statement posted on its Web site, citing spokesman Yao Jian.

The move will harm both countries’ interests and will produce a chain reaction of trade protectionism, slowing world economic recovery, the ministry said

As I’ve said more than once recently, there’s really something screwed up with the world when the leaders of China have a better understanding of basic free market principles than the President of the United States.